Sun Capital still mulling Lloyds bank branch bid

By Dominic Jeff
Published on Monday 10 October 2011 00:20

Sources close to financier Hugh Osmond have quashed weekend reports that he was pulling out of the bidding for the 632 branches being sold by Lloyds Banking Group.

Osmond’s Sun Capital Partners investment vehicle was rumoured to have shied away from a second-round bid for the branch estate because of the turbulence in financial markets.

However, it is thought that Sun Capital has upped its estimate of the cost of technology needed to run the business.

Known as “Project Verde”, the branches are being sold alongside 19 per cent of Lloyds’ mortgage business and Intelligent Finance, its internet bank. The business up for sale alone would be enough to create Britain’s seventh-largest bank.

Lloyds says it intends to name a preferred bidder by the end of the year, but could also chose to divest the Verde business in an IPO under a separate management team already in place.

It is being forced to get rid of the branches by the European Union as the price for its state bailout following the 2008 credit crisis.

Last month Osmond was reported to be canvassing investors over a possible £2 billion fund-raising. Sun Capital is also said to be the group farthest along in the process of working out how to separate the branches from Lloyds.

Osmond has lined up Mike Fairey, the former deputy chief executive of Lloyds TSB, to run the business if he acquires it. It is thought he could then swoop on further assets being sold off by banks.

Two other buyers are in the running: NBNK, a shell company run by former Northern Rock chief executive Gary Hoffman; and Co-operative Financial Services. Virgin Money, the bank arm of Sir Richard Branson’s group, and Clydesdale Bank owner National Australia Bank pulled out at the first round stage, but may make an offer at a later date.